(Yicai) March 2 -- Chinese brokerage Soochow Securities is planning to acquire a controlling stake in Donghai Securities, which is also based in eastern Jiangsu province, in order to bolster its core competitiveness and enhance its role in supporting high quality growth in the region.

Soochow Securities has signed a preliminary acquisition agreement with Changzhou Investment Group, the controlling shareholder of Donghai Securities, to buy a 26.68 percent stake in Donghai Securities by issuing new shares, the Suzhou-based firm said today. The two sides will continue to negotiate the exact terms of the deal, which will ultimately be finalized in a formal agreement.

The brokerage suspended trading of its shares this morning in preparation for the issuance of new shares and the suspension is expected to last no more than 10 trading days.

An industry insider familiar with the transaction told Yicai that Soochow Securities’ move is in response to the new ‘State Council Nine Policies,’ released in April 2024, and that through the acquisition Soochow Securities is expected to better serve the country’s national strategy and the high-quality development of the regional economy.

The new ‘State Council Nine Policies, which is how the market refers to the policy document entitled ‘The Opinions on Strengthening Regulation, Preventing Risks and Promoting High-Quality Development of the Capital Market,’ is the third such ‘Nine Policies’ after earlier versions in 2004 and 2014. It focuses on tighter regulation, risk prevention and high-quality development.

The new policy aims to build a stronger financial system and specifically calls for tougher oversight of securities and fund institutions. It also supports leading firms in boosting their competitiveness through mergers and acquisitions, reorganizations and organizational innovations, while encouraging smaller players to pursue differentiated and specialized strategies.

At the same time, Jiangsu province is stepping up efforts to become a major financial powerhouse and is promoting deeper integrated and coordinated development between the cities Suzhou, Wuxi and Changzhou.

If the deal goes through, Soochow Securities is expected to enhance its overall strength in areas such as wealth management and investment, upgrading its business layout, resource base and service capabilities across the board, the insider said.

Editor: Kim Taylor